OCBC Blue Chip Investment Plan

Total invested amount in ETFs of about S$1,900 using Automated Investing for August 2017 with transaction costs of S$8.50.

Manual Investing

Nil for August 2017.

Robo-Advisor Investing

StashAway

Funds transfer of S$400 invested in US-listed ETFs excluding annual fees based on total S$ investment

Smartly

Funds transfer of S$400 invested in US-listed ETFs excluding annual fees based on total S$ investment

Total amount invested with Robo-Advisors is S$800 for August 2017.

We went out yesterday evening for a barbecue to celebrate a friend’s engagement. It was a nice gathering and we got to catch up with some friends. Ended up staying a lot later than we expected. Feeling quite wiped out now but we still need to find the time and effort to shop for groceries, exercise at the gym, prepare dinner later. Guess we will also be watching a whole lot of TV today.

Anyway, we are currently in the process of negotiating with our bank on a repricing package for our housing loan. We started this after a quick check with our friends and colleagues revealed that the interest rate on our housing loan is much higher than even the upper end of most current housing loan packages. Although our bank has offered to reprice our housing loan to a lower interest rate, it is insisting on charging a high repricing fee that will wipe out a significant portion of our savings.

To make matters worse, we have a privilege banking relationship with this bank. Which clearly counts for nothing when we are still getting screwed in the end. That’s the frustrating thing about banks. They keep coming to us with useless offers about all the different types of loans such as personal loans. If they had analysed our cash holdings properly, they should have figured out we have no use for personal loans. And it doesn’t matter how “attractive” the interest rates are on them.

But when we need them on the one loan we care about i.e. existing housing loan. They can’t seem to offer “attractive” interest rates and offers. We have sufficient cash holdings and a big enough mortgage to apply a bit of pressure at best. However, as a retail customer, our bargaining power remains limited and there’s not much we can do at this point. The question remains as to whether our bank’s unwillingness to co-operate will incentivise us to switch banks. After all, transferring a banking relationship is a lot easier to do nowadays. We shall see.

This is going to be a non personal finance post and I’m hoping it doesn’t end up being a rant. But we are starting to lose it with SMRT and we are not even taking the North-South Line, which seems to be taking the brunt of the delays and breakdowns. We take the East-West Line in to work every weekday morning from the East side of Singapore into the city.

We used to drive in to work a few years ago since it was easy to carpool with my mother-in-law and brother-in-law. All of us were working in the city and my mother-in-law had season carparking. However, the road traffic on a weekday morning is terrible and it makes for a difficult drive. And we got to a point where my father-in-law, who is retired from full-time work, had to drive all of us in since we were too tired from work to navigate the heavy traffic.

This worked up to the point until the work schedules of my mother-in-law and brother-in-law started differing from ours significantly. Since it was taking up too much time and effort to coordinate (not economical as well to drive the car into the city twice), my wife and I decided to start taking the train in to work. We have tried taking the bus in to work on weekday mornings before. It may be the cheapest option but takes up the most time because the bus route doesn’t get us into the city directly. And the bus has to go through even worse road traffic conditions because of its route. We also tried taking taxi/Uber/Grab in to work on weekday mornings too. The fares are higher due to increased demand and can rise even further when there are train delays and breakdowns.

Which leaves us with SMRT. What should have been a cost-effective and fast means of transport to get us into the city. We have to admit that we were shocked with the state of SMRT when we first returned to Singapore in 2014. The overcrowding, train delays and breakdowns contributed to our decision to drive into the city. The last time we worked in Singapore before 2014 was as interns in 2008. It was a different world back then when SMRT used to be a lot more reliable and trains were less crowed with few delays and breakdowns.

With this new signalling system installed, SMRT seems to have reached a new low. When testing the new signalling system during peak hours, it causes signalling faults instead of reducing the interval time between trains like it’s supposed to do. The fact that a new system breaks down almost every time you test it goes to show how many fundamental problems it has. And it doesn’t seem to be improving, which worries us even more.

We are fine to be used as guinea pigs if we can see the new signalling system stabilising but this is not the case. This is what it’s like for us every weekday morning. We check the SMRT Twitter feed to see if there is a major train delay or breakdown before we take the bus and make our way to the train station. After all, the SMRT Twitter feed doesn’t announce minor train delays, which can be just as problematic when you are trying to be on time for a 9am meeting.

Even if there is no major train delay or breakdown, as we take the escalator up to the platform, we hope SMRT has got their act together that day. Sometimes, we hear announcements on train delays due to signalling faults. These don’t show up on the SMRT Twitter feed but we know we are screwed the moment we see long queues at the platform doors. We wait in line and look at the train interval times. Anything above 3 mins means we will be in this mess for a while. Yup, it’s 4 mins, sometimes 5 min, which explains a lot. We can look forward to missing trains and squeezing ourselves onboard to be packed like sardines in a small space.

We watch all our time and effort waking up earlier in the morning and taking the bus to the train station evaporate as we miss a few trains. People on the trains don’t like to squeeze to the centre and people waiting for the trains don’t like to squeeze onboard. We don’t blame them. Nobody likes to start their morning in such a manner. But we have no choice if we don’t want to be late for work. So we push ourselves into the trains and sometimes tick off the people that are already packed so tightly against each other.

That’s how we start our morning, the most important part of the day. What kind of mood do you expect us to be in for the rest of the day? And you wonder why Singaporeans are always so pissed off. As we stand in the trains with people’s arms, hands with phones and bags jammed up against our bodies and faces, we start to feel our patience wear thin. Then we start to feel our anger grow. We feel stuck in every way since there’s no viable alternative mode of transport we can take into the city without causing even more inconveniences or paying more money.

SMRT platform staff is telling us loudly (people with their faces pressed against the door that can hear them the most) to move in to the centre. We see posters of SMRT technical staff smiling and working hard asking for us to be patient with them while the trains continue to have delays and breakdowns. Lastly, we remember our Coordinating Minister for Infrastructure and Minister for Transport Khaw Boon Wan complaining about the media over-reporting on train delays and breakdowns. And his assurances that the system should stabilise over time despite having no technical or engineering breakdown. A person with a million dollar annual salary and who probably doesn’t take the train in to work telling us to believe in him.

By the time we get to Raffles Place mrt station, we have anger management issues and feel like punching someone in the face. But it all goes away when we get to work because we have to deal with more important problems and keep our jobs. When the evening comes around, we have lost hope in SMRT and expect the trains to be delayed and breakdown. We feel fortunate and thankful that our train is on time. We even have space to stand in the center and talk to each other about our day. We start wondering whether SMRT is conditioning us for this new environment with their recent change in operating model to “You are lucky if we are on time”. Well done SMRT!

I had an interesting conversation with a friend recently over a lunch gathering during the weekend. It was about all the effort required to manage the multiple high interest bank accounts and associated cash rebate credit cards. Whether it was worth the time monitoring the bank account balances and credit card spending to ensure we maximise the interest earned and cash rebates received.

She gave a good argument on how you should be spending that time and effort more efficiently e.g. trading to earn higher investment income, deriving side hustle income, etc. A case of not seeing the forest for the trees. Which makes sense when you think about the situation she is in. Both her husband and her work while their kids are still young and it takes up so much of their time bringing them up well. This leaves them with a limited attention span to focus on what’s important financially.

And it’s not these high interest bank accounts and cash rebate credit cards that have limited upside since there’s a cap on how much you can earn from them. Let’s not forget she is a decent trader with a track record of earning investment income consistently and has good business ideas that she plans to execute on soon. So their approach is to have 2 banks account and 2 credit cards in total between the husband and her, easy to monitor and manage. As a comparison, we have 10 bank accounts and 10 credit cards in total between my wife and I.

I must admit that I have never thought about the opportunity cost of managing so many bank accounts and credit cards. It just didn’t occur to me that simplification could be a possible way to approach this. However, our personal circumstances are different since we have no kids, no trading ability to generate investment income and no business ideas to execute on. By now, the process of monitoring the bank account balances and credit card spending has become so natural that we just execute the actions without thinking. This is taking into account the initial time and effort needed to set up the entire personal banking system.

That was the argument I floated across to her. In terms of time and effort, the initial setup costs are high but the ongoing maintenance costs are low. Doesn’t she want to optimise her idle spending, emergency and investment cash funds? Another good answer from her. She doesn’t keep excessive spending, emergency and investment cash funds like us since they are usually deployed in the markets for higher returns. She only holds sufficient levels as insurance against job loss but doesn’t see the need to hold beyond that since both of them are still working and drawing high salary income. My wife and I always have a tendency to keep large cash balances in bank accounts. Call it peace of mind, sense of security. But it makes us feel safe. Though it’s not efficient from an investing perspective.

I enjoyed having that conversation very much. It’s not often I get to debate on various financial approaches. The point is not about who’s right and wrong. Everyone has a different strategy. Yes, over time, some may prove more effective than others. But it’s more important to find out what works for you personally. I probably should start attending more talks and seminars to meet like-minded people. The good thing for my wife and I is that we have a close circle of friends that are older than us with kids and more life experience. We are the youngest in that group and continue to learn as much as possible from them.

I took some time off the blog for about a week. Was posting consecutively for a few days and ran out of topics I was interested to write about. We took last Friday off work to take a break and had a busy schedule of meeting up with friends for lunches and dinners over the long weekend. By the time Sunday came around, we were tired from all the meetups. We became even more exhausted after forcing ourselves to hit the gym for our weekly exercise session and cooking dinner afterwards.

We don’t often have such a packed weekend social calendar and it’s easy to see why we prefer to spread out the events. Oh well, can’t be helped that everyone else is only free to meet up over the weekend as well since nobody is in the mood to gather after work on weekdays. This has taken its toll and my wife has turned in early. Sound asleep. I just checked.

Which gives me time to write a blogpost. This is when I sometimes do research on personal finance, investments stuff and update our Google Sheet & blog numbers. It’s also my alone time, where I get to think and plan about our financial independence/freedom strategy. Tonight, I read about Kyith’s post at InvestmentMoats: No Matter How Much You Earn, If You Spend Too Much, You Cannot Retire.

Very useful and relevant content to us. I found myself agreeing with every point he made. It’s true that there are a large number of Singaporeans earning upwards of S$80,000 per year. This is possible in several industries depending on the years of experience, although you will probably find the largest number in the finance (banking, asset/fund management, private equity and trust group), accounting and legal sectors.

The low personal income tax rates in Singapore have allowed for high levels of discretionary spending by this group of people. Having worked in Australia (a country with high personal income tax rates) and knowing friends/colleagues that have come over to work in Singapore, all of our spending power has gone up significantly. It’s not just the difference in taxes. The fact that basic living expenses such as food, utilities, internet, cable TV and public transport are less expensive here have also helped.

I’m not sure whether Singaporeans know how fortunate they are in this aspect. By the way, I’m not arguing that paying more taxes to fund social spending is a bad thing. But when you find yourself paying a lot more taxes and most of the benefit goes to other people. It’s not going to go down well with you even if they are the less fortunate and deserve our help. No need to criticise me on this point. I have never seen a middle, upper middle or upper income employee be happy to pay the high taxes in Australia. Or even a similar person being happy to pay the low taxes in Singapore.

Anyway, we fit right into that high income, high spending family profile outlined in Kyith’s article. The challenges we face according to him are:

Potential cash flow hits after 35 years old due to the increasing volatility of our job nature.

I always get worried when I read stuff like that. Because I do actually think we are going to get screwed by the above 2 points. By my calculations, if my wife loses her job now, we will be cash flow negative every month. If I lose my job now, we will still be slightly cash flow positive every month. And you wonder why I support and encourage my wife to work?

Besides, we already have friends that are several years older and facing those challenges. Their pay has stagnated, jobs are at risk but cannot reduce the expenses sufficiently to manage the cash flow issues. Makes me wonder how many times we have to get reminded before taking tangible steps to address this eventuality.

I want to say it’s not for lack of effort. But I would be lying somewhat. Yes, we have taken steps to lower our expenses. At first, I attributed the lack of results to it taking time for the effects to flow through. Then I realise we have just been using that extra cash flow on our travel spending (supposedly for richer life experience) i.e. reallocation instead of long-term reduction.

So yes. This is harder than you think in case you are wondering why we are just squandering the opportunity to be financially independent earlier than others. Because it’s true that not many can grasp it. We worked hard, smart and got lucky to get to this position. As grateful as we are to have the privilege, we always want to rewards ourselves for still being here. Navigating that conflict between gratification from keeping ourselves in this position and understanding it’s not going to last forever is a tough ask.

It would require both my wife and I to be on board for this to work. We may not be the worst offenders of being high income, high spending but enough to be a problem. The sad thing is I don’t see us changing until a major event happens. Forced changes can be a bitter pill to swallow but that might give us the push we need. I can only hope we are ready for it.

I have been reading GMGH’s recent posts about Cryptocurrency. The latest one being Don’t Crybaby To Me About Bitcoins & Cryptos. His posts piqued my interest in Cryptocurrency, which is a financial topic that I have no knowledge of. Not even a cursory understanding of it. I know it is a digital currency that used encryption/cryptography to generate money and verify transactions. Examples of Cryptocurrency are Bitcoin, Ethereum and Litecoin. There’s a Cryptocurrency Wallet that is a secure digital wallet used to store, send and receive digital currency. This technological development is expected to revolutionise and change the world.

GMGH talks about Cryptocurrency exchange in Singapore and mentions Coinbase. I went to have a look and it seems like a simple and well-designed platform to buy and sell digital currency. I check the 1 month price history of Bitcoin, Ethereum and Litecoin on the Coinbase website and this is what I found.

Bitcoin

Ethereum

Litecoin

Is it considered an Alternative Asset?

The rate of returns in the past month are much higher than any other asset class. Which brings me to my next question. Would you consider Cryptocurrency an Alternative Asset? It refers to assets that have not been traditionally considered part of an investment portfolio. Examples of traditional asset classes being stocks and bonds. But I am confused. I thought Cryptocurrency is a transfer or payment mechanism. How can it be a store of wealth as an alternative asset class? Then again, cash can be used to make payments and transfer wealth, hence it is considered an asset class. Plus Cryptocurrency does have asset-like characteristics. It has a limited supply and is traded on exchanges in multiple currencies around the world.

Do I have sufficient cash funds to take a position in Cryptocurrency?

Knowing nothing about Cryptocurrency and investing in it is the fastest way to get burnt. Before I decide to pursue this any further, I want to know whether I have enough cash to take a position. Our investment portfolio has been overweight on cash for a while, which suggests I have room to allocate a portion of it to Cryptocurrency. I have always wanted to start building up an alternative asset component of our asset holdings. Perhaps now is the time to start exploring this further. But I really should read up on Cryptocurrency first and I will need to convince my wife about this. Wish me luck!